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dc.contributor.authorKocabiyikoǧlu, A.en_US
dc.contributor.authorPopescu, I.en_US
dc.contributor.authorStefanescu, C.en_US
dc.date.accessioned2016-02-08T11:02:58Z
dc.date.available2016-02-08T11:02:58Z
dc.date.issued2014en_US
dc.identifier.issn0025-1909
dc.identifier.urihttp://hdl.handle.net/11693/26654
dc.description.abstractThe integration of systems for pricing and revenue management must trade off potential revenue gains against significant practical and technical challenges. This dilemma motivates us to investigate the value of coordinating decisions on prices and capacity allocation in a stylized setting. We propose two pairs of sequential policies for making static decisions - on pricing and revenue management - that differ in their degree of integration (hierarchical versus coordinated) and their pricing inputs (deterministic versus stochastic). For a large class of stochastic, price-dependent demand models, we prove that these four heuristics admit tractable solutions satisfying intuitive sensitivity properties. We further evaluate numerically the performance of these policies relative to a fully coordinated model, which is generally intractable. We find it interesting that near-optimal performance is usually achieved by a simple hierarchical policy that sets prices first, based on a nonnested stochastic model, and then uses these prices to optimize nested capacity allocation. This tractable policy largely outperforms its counterpart based on a deterministic pricing model. Jointly optimizing price and allocation decisions for the high-end segment improves performance, but the largest revenue benefits stem from adjusting prices to account for demand risk.en_US
dc.language.isoEnglishen_US
dc.source.titleManagement Scienceen_US
dc.relation.isversionofhttp://dx.doi.org/10.1287/mnsc.2013.1782en_US
dc.subjectCoordinationen_US
dc.subjectHierarchical policiesen_US
dc.subjectLost sales rate elasticityen_US
dc.subjectPrice-sensitive stochastic demanden_US
dc.subjectPricingen_US
dc.subjectRevenue managementen_US
dc.subjectEconomicsen_US
dc.subjectElasticityen_US
dc.subjectManagementen_US
dc.subjectOptimizationen_US
dc.subjectStochastic systemsen_US
dc.subjectCoordinationen_US
dc.subjectHierarchical policyen_US
dc.subjectLost saleen_US
dc.subjectRevenue managementen_US
dc.subjectStochastic demanden_US
dc.subjectCostsen_US
dc.titlePricing and revenue management: the value of coordinationen_US
dc.typeArticleen_US
dc.departmentDepartment of Managementen_US
dc.citation.spage730en_US
dc.citation.epage752en_US
dc.citation.volumeNumber60en_US
dc.citation.issueNumber3en_US
dc.identifier.doi10.1287/mnsc.2013.1782en_US
dc.publisherINFORMS Inst.for Operations Res.and the Management Sciencesen_US


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